Decade of ESG: Six ESG Stocks on the ASX


  Article

PUBLISHED: 13-01-2021 14:55 p.m.

ESG (Environment, Social, Governance) has become essential in business and investment circles, setting a new standard in measuring the sustainability and ethical impact that a company makes.

Investors, customers, employees and the community are now demanding best practice ESG from companies.

Global sustainable investment now tops $30 trillion - up 68% since 2014 and tenfold since 2004.

Six listed companies are leading the way being the first on the ASX to start reporting on ESG using a recently launched global standard ESG framework from the World Economic Forum developed in collaboration with the big four accounting firms.

We invested in these companies because we like their green, social and ethical credentials - and we see significant financial upside as well as making a positive impact.

These small to medium ASX listed early adopters are reporting ESG - over and above the quarterly financial and operational updates required by the Australian Stock Exchange.

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The acceleration in ESG has been driven by heightened social, governmental, and consumer attention on the broader impact of corporations, as well as by the investors and executives who realise that a strong ESG proposition can safeguard a company’s long-term success.

ESG reporting offers a way for customers, investors and society to hold companies to account, to make sure that the issues people care about (social justice, equality, diversity, environment, etc.) are reflected and appropriately addressed by the companies we choose to do business with and invest in.

All while delivering outsized financial returns to investors, meaning a win-win for every stakeholder.

Why will ESG companies (and their investors) win in 2021 and beyond?

Businesses that can demonstrate real ESG commitments, progress and credentials can gain from significant benefits, such as:

  • Access ESG funds: There is currently more ESG money than there are ESG investment-ready opportunities.
  • Secure top tier customers: Top companies are conscious of ESG in their supply chain and want to buy from best-in-class ESG suppliers
  • Attract the most talented teams: Smart people no longer want to work for non-ESG companies.
  • Positive community perception: Doing business at all levels is just easier when the community wants you to exist and supports you.
  • Shareholder returns with positive impact: Be proud in creating positive change in the world while providing outsized returns to shareholders.

Companies that align their goals to the long‐term goals of society are most likely to create long‐term sustainable value, while driving positive outcomes for the business, the economy, society and the planet – and ultimately shareholders as well.

From an investor’s point of view, ESG companies will deliver better returns as they attract more customers, more investors and better talent.

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A new universal ESG framework

In September 2020, The World Economic Forum launched its White Paper "Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation" which called for a universal framework for ESG measurement.

This framework consists of 21 core and 34 expanded metrics and disclosures aimed at mainstreaming reporting and progressing toward a generally accepted international standard for ESG.

First group of ASX companies have adopted this new ESG framework

Keen to maximise the benefits associated with demonstrable ESG, the first cohort of small to medium ASX listed companies have released their first quarterly ESG Progress report using the newly released WEF ESG metrics.

We are proud and excited that several of our portfolio companies are some of the first adopters of the new ESG reporting framework.

Our portfolio companies who have released their first ESG progress report include:

  • Vulcan Energy (ASX:VUL) - Exists to decarbonize the currently high carbon production footprint of lithium-ion batteries used in electric vehicles by producing a world-first Zero Carbon Lithium® hydroxide product in Germany.
  • Whitehawk (ASX:WHK) - Empowering a fearless internet through Online Cybersecurity Exchange platform that provides cyber risk scoping, prioritization and mitigation products and services.
  • Euro Manganese Inc. (ASX:EMN) - Green and European source of ultra high purity manganese for electric vehicle batteries developed from the recycling of a tailings deposit located in the Czech Republic.
  • Elixir Energy (ASX:EXR) - Elixir Energy is exploring for natural gas on the Mongolian-China border to replace burning of coal for energy in China.
  • Minbos Resources Limited (ASX:MNB) - Exploration and development of a phosphate (fertilizer) project in Angola. Working with the International Fertilizer Development Centre to develop education programs to small holder farmers, utilising its phosphate fertilizer to increase crop yields.
  • Myfiziq (ASX:MYQ) - Accessible, advanced human imaging by smartphone app for the med-health, population health, fitness and insurance sectors.

The companies are using impact monitoring technology, Socialsuite, to periodically collect and report across the World Economic Forums recently released 21 standard ESG metrics.

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